Deal focus: NPX adds tech to Korea’s culture thesis

After receiving USD 3.5bn in private funding and realising a USD 4.5bn US IPO last year, e-commerce company Coupang is widely credited with bringing Korea’s internet start-up scene to the global spotlight.

Now, with the stock having fallen more than 50% since its heady debut, a more sober assessment of the domestic-focused business model is circulating: Coupang may well be crowned the Amazon of Korea, but it will never be Amazon.

“Korean start-ups are not global, even the huge ones like Coupang. So, we decided to go after verticals in Korea that could be globalised,” said Samuel Hwang, CEO of Korea’s NPX Capital.

“We see Korean content going global as a long-term trend, not a fad. It’s not just Squid Game, Parasite, and BTS. With the advent of OTT [over the top] platforms, Korean content has access to a global audience, and we’re just seeing the tip of the iceberg.”

Hwang started his career founding Chinese education technology start-up New Pathway Education, which was sold for almost USD 700m to CVC Capital Partners in a staged process ending in 2016. He established NPX as a family office shortly thereafter, acquiring a private equity license in 2019. The firm has business units focused on buyouts, VC, and real estate.

NPX has raised USD 250m across several single-asset project funds from institutional investors in Korea. This is being poured into a media-focused M&A platform called Terapin Studios, which has been set up as a US-based parent for various Korea-based content producers.

Earlier this year, co-headquarters were established in Los Angeles and Hwang relocated to the city to oversee the project. The first major acquisition to be confirmed is Seoul-based cartoon studio Copin Communications.

NPX invested USD 43m last month, doubling down on a USD 13m commitment in September last year. Copin is now a 100% subsidiary of Terapin and will be renamed Terapin next month.

Webtoons central

Only Kakao and Naver produce more webtoons – Korea’s take on Japanese anime – than Copin. The company uses a range of advanced technologies to punch above its weight such as artificial intelligence-automated colouring and an image archiving system borrowed from the gaming industry that allows source materials to be efficiently re-used across titles.

There are about 325 employees focused entirely on producing webtoons for dozens of subscription-accessible titles with intellectual property rights across several genres, the most popular being fantasy and romance. An entire series can be produced for less than USD 100,000. “It’s like a factory for webtoons,” Hwang said.

The plan is to take Terapin public in the US via a special purpose acquisition company (SPAC) within the year and tap the country’s burgeoning appetite for webtoons. Three potential SPACs have been identified as inroads to date.

“It’s illegal for a Korean company to merge with a US SPAC, but now that we’re a US company with a Korean subsidiary, we can SPAC it on NASDAQ. We’re working with law firms Kim & Chang in Korea and Paul Hastings in the US, and all of them say they’ve never seen this done before,” Hwang said. “If we get this done, we will have made history in the Korean buyout space.”

There is a fair amount of work to be done in the meantime. In addition to establishing a US-based management team and navigating various procedural accounting hurdles, there are two outstanding platform acquisitions.

Hwang declined to specify the companies in question since the deals have yet to close but identified them as a Korean webtoon studio with 50m viewers (mostly outside Korea) and a US-based virtual reality gaming specialist that will help take Terapin into the metaverse.

Co-development work between Terapin and the US company is underway for an immersive “choose-your-own-adventure” webtoon product. It is expected to be available on platforms such as PlayStation Store and Xbox Games Store, which have recently started featuring anime.

Still, despite the tailwinds of the “Korean wave” cultural export phenomenon, cracking the US will not be easy. Hwang concedes that getting a deal with a major platform like Netflix, Amazon Prime, or Disney Plus is practically essential. Kakao and Naver have tried this with their webtoon programs and so far failed. One possible solution is helping foster a smaller OTT specialising in Korean content.

“It takes a special kind of background and team to do this successfully. Rather than the US team and the Korea team being separate and working on separate deals, it needs to be one team across markets,” Hwang added.

“They need to be localised in the sense that they understand their respective markets very well. But they will need to be incentivized as one team to create a globalised opportunity in buyout.”

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• Topics
• North Asia
• Technology
• Media
• Expansion
• South Korea
• USA
• TMT
• NPX Capital